DALLAS (CN) – A Dallas-area man accused of running an oil and gas securities scam must pay more than $4.75 million in disgorgement, interest and civil penalties, a federal judge ruled.
U.S. District Judge Jane Boyle ordered George Wesley Harris, 37, of Mansfield, to disgorge $2,088,850, pay $333,767 in prejudgment interest, and pay $2,370,000 in third-tier civil penalties.
The Securities and Exchange intervened in 2009 after Harris and his company, Giant Operating LLC, raised more than $16.6 million from 150 investors regarding five unregistered oil and gas securities offerings over a two-year period. It also sued Giant Petroleum, of Irving; Stephen Christopher Plunkett, 33, of Grand Prairie; and DSSC Operating, also of Irving.
According to the complaint, Harris’ sales team made unsolicited cold calls to prospective investors and indicated a 100 percent return on investments within a year. But Harris failed to tell investors that the company had never operated a profitable oil & gas program, and he diverted investor money to his other companies, sales commissions and himself, the SEC said.
After Harris consented in writing to an entry of final judgment of permanent injunction in September 2010, he protested how much the court expected him to pay in disgorgement and penalties.
Harris pointed to his cooperation with the SEC and the receiver, which included providing “information relative to assets and activities of [Giant Operating] and various individuals,” and “voluntarily turn[ing] over nearly all of his assets to the receiver.”
He argued that the SEC overstated his gains by not accounting for funds that went to Plunkett, DSSC, DSSC employees and others.
Boyle disagreed, finding that “Harris has not met his burden to show that the SEC’s proposed disgorgement is not a reasonable approximation of his gains.”
“Faced with the SEC’s motion for final judgment of disgorgement, Harris provides only argument that most of the funds he received went to other parties, without any evidence in support,” the March 7 decision states.
While the fraud may have raised more than $16.6 million, Harris said the actual loss to investors was lower, given his estimate that the value of the oil-well interests they received is approximately $13 million, “based on known production of oil wells drilled to the same depth in the same field and region of New Mexico.”
Boyle rejected this claim, as well as the Harris’ alleged inability to pay.
“The court finds Harris’ arguments unavailing,” Boyle wrote. “Once again, Harris provides no evidentiary support showing that the SEC’s requested penalty amount is inappropriate. Indeed, the information the Court has received from the Receiver up to this point suggests that the value of the oil well interests within the Receivership is well below the $13 million figure suggested by Harris. The Court recognizes that, based on both Harris’ and the SEC’s statements, Harris has cooperated with the SEC and the Receiver and provided significant information which has aided their efforts to collect assets and litigate this case. However, such cooperation does not change the fact that Harris participated in a fraudulent scheme and misled investors, resulting in the substantial loss or risk of substantial loss of investor funds. Further, inability to pay must be established by a preponderance of the evidence, rather than the plain statement of a defendant, as we have here.”